The chairman of China’s National Health and Family Planning Commission (HFPC) highlighted potential reforms that would allow increased foreign investment in China’s medical services industry, as well as support the “two-child policy” at a recent press conference.

At an executive meeting of the State Council approximately two weeks later, China’s Premier Li Keqiang confirmed that China will be pursuing the policies outlined in the HFPC chairman’s press conference. Premier Li’s statements signaled that these policies had the support of China’s government and will soon be put into practice.

At a 13 March 2014 press conference, the Chairman of the National Health and Family Planning Commission (HFPC) of the People’s Republic of China Li Bin reviewed the commission’s achievements in health care reform since the former Ministry of Health and former Family Planning Committee merged as the HFPC one year ago. HFPC Chairman Li also commented on trends in China’s health care and health care-related policies, highlighting in particular the potential reforms that would allow increased foreign investment in China’s medical services industry and support the recently announced “two-child policy”.

Approximately two weeks later, at a 25 March 2014 executive meeting of the State Council, China’s Premier Li Keqiang articulated the Chinese Government’s confidence regarding the policies outlined by HFPC Chairman Li, indicating that the policies have the support of China’s Government and will soon be put into practice. A detailed analysis of the reforms follows.

As mentioned, Premier Li’s comments indicate the government’s support of allowing increased foreign investment in China’s medical services industry. Of note was Premier Li’s comment that “the non-public medical institutions (including foreign-owned and private-owned medical institutions) shall be treated the same as public medical institutions, particularly in aspects of the designation of national health insurance unit, the appraisal of professional titles, and the national ranking of medical institutions.”

To facilitate the level of foreign investment and participation envisioned, the current patchwork of laws and regulations that have allowed gradual and increased foreign participation in the medical services industry will likely be reformed further. Briefly, existing laws include:

Two 2010 regulations promulgated by the Ministry of Commerce and the former Ministry of Health, allowing investors from Hong Kong, Macau and Taiwan to establish wholly foreign-owned medical institutions in certain pilot provinces, including Shanghai, Fujian, Guangdong, Hainan, Chongqing and Jiangsu. With the release of Certain Opinions to Expedite the Development of Non-public Medical Institutions, it is expected that the pilot zones will be extended to all cities at the prefecture and above levels in the near future.

In 2011 the most recent Foreign Investment Industry Guidance Catalogue permitted foreign investors to invest in the medical services industry and establish foreign medical institutions such as foreign hospitals. The Interim Measures for the Administration of Sino-Foreign Equity and Cooperative Joint Venture Medical Institutions (promulgated in 2000) (Sino-Foreign Medical Institutions Measures) was, however, not amended. It still prohibits wholly foreign-owned medical institutions and only allows joint venture medical institutions.

In 2013 officials announced that foreign investors would be allowed to establish wholly foreign-owned medical institutions in the newly launched Shanghai Free Trade Zone if the proposed medical institutions met several requirements, including those in respect to capital requirements, operation period and the experience of the foreign investors in the medical services industry.

It is expected that the Sino-Foreign Medical Institutions Measures will be amended and new regulations will be promulgated in order to further lift the limitation on ratio of foreign investment in medical institutions.

It is obvious that China is adopting a gradual approach to opening up its domestic medical services market to foreign investments, in a manner that not only protects Chinese public hospitals but also steadily brings in advanced medical institutions to modernise the Chinese medical service market as a whole. How this will be carried out in practice while maintaining that balance will be the subject of further laws and regulations governing areas such as capital requirements, administrative approval procedures and purchases of large medical equipment.

The authors will continue to monitor developments in this area and provide updates as necessary.

Approval Procedures for Foreign-invested Medical Institutions

At present, establishing a foreign-invested medical institution in China is subject to complicated and layered procedures and approvals. These procedures mainly include industry access review, foreign investment review and approval, antitrust review, national security review, tax and foreign exchange regulation and supervision of the sale of state-owned assets by a number of authorities such as the HFPC, Ministry of Commerce (MOFCOM), Ministry of Human Resources and Social Security, the State Administration for Industry and Commerce (SAIC), the State Administration of Foreign Exchange, the State Administration of Taxation (SAT), State-owned Assets Supervision and Administration Commission and the China Securities Regulatory Commission.

However, pursuant to HFPC Chairman Li’s comments, the government is directing its efforts towards simplifying approval procedures to facilitate foreign investment in the medical services industry. Such efforts are already reflected in newly released regulations such as the Interim Measures for the Administration of Wholly Foreign-owned Medical Institutions in the Shanghai Free Trade Zone, which prescribes that all competent authorities must decide within 40 working days of the acceptance of application documents for the establishment of a wholly foreign-owned medical institution whether to issue the approval of that wholly foreign-owned medical institution. In contrast, the Sino-Foreign Medical Institutions Measures, which regulate the approval procedures for foreign-invested medical institutions throughout China, indicate that only the HFPC and MOFCOM approval procedures must be completed within 90 working days from acceptance of application documents, while administrative procedures required to be undertaken by SAIC and other competent authorities require a greater time for completion.

Restrictions on Purchases of Large Medical Equipment

HFPC Chairman Li also announced that restrictions on purchases of certain large medical equipment, such as PET-CT, gamma knife, MM50, proton therapy system, CT, MRI, DSA, SPECT and electron linear accelerator equipment, by medical institutions—whether public or foreign-invested—will be revealed in the future.

Since 2004 the purchases of certain large medical equipment have been subject to the approval of the HFPC or a local branch of the HFPC at a provincial level. The restriction was put in place to regulate public finance. Existing HFPC guidelines at both the state and local levels set out basic requirements that need to be satisfied before medical institutions can purchase large medical equipment. Such requirements include scale of institution, number of professionals and number of outpatient and emergency visits within a set period.

The relaxation of equipment purchase restrictions is a positive development for most medical institutions, especially for those owned by foreign investors. Indeed, because large medical institutions in China are typically state-owned, the current restrictions were made without much consideration of non-public medical institutions. Foreign-invested medical institutions that do not fulfil the requirements, e.g., on the basis of the scale of institution, are not permitted to purchase large medical equipment even if they have sufficient funds or patient need. The restrictions also unduly handicap potential foreign investors planning to establish medical institutions in China.

The relaxation of the above restrictions will likely create a friendlier investment and operational environment for foreign investors, encouraging their investment in China’s medical service industry.

Physician Multi-site Practice

During the press conference, HFPC Chairman Li stated that final regulations to the Exposure Draft on Physician Multi-site Practice released earlier this year will be promulgated in 2014. The final regulations are based on the Exposure Draft and incorporate feedback provided to the HFPC from various industry sectors. Premier Li also emphasised it is critical to implement such physician multi-site practice policy.

The Exposure Draft states that certified physicians, except for the heads of clinical departments, medical laboratories and administrative departments ,and physicians at higher administrative levels, will be allowed to practice in two or more sites such as hospitals, clinics, sanatoriums and first-aid stations. Among these sites, one will be determined as the primary site. The physician shall execute an employment contract with this primary medical institution and enter into multi-site practice agreements with other medical institutions. In addition, the physician needs to ensure his or her practice in the primary medical institution will not be influenced by the practices in any other medical institutions. Each medical institution, together with the physician, shall be liable in any dispute or accident arising from the practice carried out in that medical institution.

The Exposure Draft focuses on Chinese nationals who are certified physicians. Foreign physicians with foreign professional certificates have been allowed to practice at multiple sites ever since China established the Foreign Doctor Short-Term Medical Service policy in 1992.

Beneficiaries of the physician multi-site practice policy are non-public medical institutions, particularly foreign-invested medical institutions. At a stage where most Chinese physicians are exclusively employed by public hospitals and foreign doctors are still subject to a number of restrictions, the implementation of a multi-site practice policy meets, to some extent, the demands of foreign-invested medical institutions for good, local doctors.

Support for the “Two-child Policy”

China is slowly relaxing its “one-child” policy and allowing its citizens to have two children in certain circumstances, for example, if both parents are only children or, according to the most recent policy, if either of the parents is an only child. Over the past 30 years, China has strictly enforced the “one-child” policy: any Chinese family that gave birth to more than one child was typically subject to a penalty (e.g., social support fee) equivalent to two to three times the high average annual household income in the city where the family lived, or the actual annual family income of the family.

Different cities may apply different standards and practices. The “one-child” policy and social support fee system are enforced by the local branches of the HFPC under the supervision of the HFPC. The resulting “two-child policy” has so far been implemented in eight provinces. With more regions set to adopt the policy, China may possibly experience a baby boom. In response, HFPC Chairman Li emphasised that the government will direct certain available resources towards the construction of infrastructures related to gynecology, obstetrics and pediatrics.

Evidence of this is available in the form of the new branch of Shanghai Children’s Hospital, which was unveiled recently. The new Children’s Hospital is three times larger than the original.

Thus, there is likely to be strong demand for the establishment of medical institutions or the provision of medical equipment/services in connection with gynecology, obstetrics and pediatrics. In addition, the growth of such institutions, the provision of related goods and services will likely be encouraged.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.

- hide

Privacy Policy (Updated: October 8, 2015):

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.

Security

JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.